Public registers of beneficial ownership come in different forms and the subject remains controversial, given the need to defend legitimate financial privacy and the constant pressure to track down money launderers. A UK-based institute's study on the subject has drawn praise from the BVI.

A UK-based think tank focusing on security matters has set out how international financial centres can make beneficial ownership registers work without threatening legitimate privacy. And its efforts have been lauded by the British Virgin Islands, a jurisdiction that at times has expressed its reservations about the idea.

Royal United Services Institute for Defence and Security Studies has urged IFCs to harmonise standards, make state organisations responsible for validating information, and make beneficial ownership information as accessible as possible, with certain safeguards.

BVI Finance, the organisation that speaks for the British Virgin Islands’ financial services industry, yesterday welcomed the institute’s study.

“RUSI’s comprehensive and balanced research is an important addition to the current debate on beneficial ownership. Context is so important in this issue and is often overlooked or incorrectly applied. RUSI has set out clearly the main areas that must be considered when looking at beneficial ownership disclosure,” Elise Donovan, CEO of BVI Finance, said. 

“The report is a practical and useable guide that if taken on board, will go some way in helping achieve a unified approach which is key to success. It will also help as we work together towards a common end-goal of combatting all forms of global financial crime and money laundering,” she said.

The report comes at a time when a drive for public registers of beneficial ownership has alarmed some wealth management figures in offshore centres such as the BVI, Cayman Islands, Jersey, Guernsey and the Isle of Man. Public registers are controversial. Defenders say that they are needed to stop money laundering and tax evasion. Opponents worry that without safeguards governing who has access to this data, they put legitimate financial privacy at risk – no small matter at a time when wealthy persons from certain jurisdictions can be threatened.

The BVI has supported the beneficial ownership register idea, but with certain “reservations.”

In a speech to lawmakers in September, Premier and Minister of Finance of the British Virgin Islands, Honourable Andrew A Fahie, said: “Mr Speaker, subject to our reservations below on the format that the publicly accessible registers of beneficial ownership is to take, your Government commits to work in collaboration with HMG towards a publicly accessible register of beneficial ownership for companies, in line with international standards and best practices as they develop globally and, at least, as implemented by EU member states, by 2023, in furtherance of the EU fifth Anti-Money Laundering Directive.”

“I wish to emphasise, as stated above, this undertaking is subject to our reservations which include that the format must be in line with international standards and best practices as they develop globally and, at least, as implemented by EU member states,” he said. (Source: Government of the British Virgin Islands, 22 September).

BVI register
BVI Finance said the BVI was one of the first of the British Overseas Territories and Crown Dependencies to develop an “advanced, verifiable and accessible company register which is fully compliant with international standards and has created an effective beneficial ownership process that has been recognised internationally.”

In 2016, the BVI signed an Exchange of Notes with the Government of the United Kingdom relating to beneficial ownership of companies. In 2017, the BVI launched its Beneficial Ownership Secure Search system, an electronic search engine that enables the relevant BVI Authorities to have a searchable database with information on BVI companies and their beneficial owners. 

BOSS was used in disclosing information which warranted the UK's first Unexplained Wealth Order, obtained by UK authorities in 2018. The BVI shares information with more than 200 countries.

The institute’s report was written by Tom Keatinge, director, Centre for Financial Crime and Security Studies, RUSI, and Anton Moiseienko, research fellow, Centre for Financial Crime and Security Studies.

“Beneficial ownership disclosure – collecting and sharing information on genuine (rather than formal or nominee) owners of assets – is an area of financial crime policy that many countries struggle with. It can be highly emotive, as demonstrated by the public disagreement between the UK, the first state with a publicly accessible beneficial ownership register, and certain British Overseas Territories (BOTs), which favour only making beneficial ownership information available to state authorities,” the authors said.

The study notes that according to the Financial Action Task Force, the intergovernmental body leading moves against money laundering, there are three main ways of setting beneficial ownership for companies: 

-- Registry approach: Requiring company registries to obtain and hold up-to-date beneficial ownership information; 
-- Company approach: Requiring companies to keep information about their beneficial owners that can be made available to authorities on request; and 
-- Existing information approach: Using otherwise available information, including due diligence files prepared by regulated businesses.